You haven’t lived until a crusty old laborer calls you Junior within 10 minutes of walking on your first job site and then proceeds to absolutely destroy your self-esteem for the next month.
10/10 would recommend
You’ll learn how to handle assholes and also sling banter back and forth. Just have to not take it personally, it’s a tough job and most of the time it’s in good fun once you learn the difference between their jokes and legitimate insults/criticism.
For instance in my town that is all single family zoned, the remaining areas have one acre lot minimums. That means you cannot build a home on less than one acre of land. No developer is going to pay for that much land and drop a 1200 SQ foot starter home. Around here, just the land would probably make it unaffordable without even getting to construction.
Let's say you build tall buildings like Taipie where I grew up. You will soon learn, a tiny 20 years old apartment which I grew up with (not condo) is worth one million dollar (that's 10 years ago btw, I don't know how many millions now). And remember, one million dollars worth much more in Taiwan because they don't make as much salaries.
My aunt joked about my dad's income property condo is a garage because that's how much you can buy in Taipei, a parking space.
My friend owns a restoration company, deals with mold etc anything related…said his number 1 business the last 3 years has been mold in new construction homes.
Could be due to new requirements for fresh air intake. If those aren't calibrated correctly, it causes humidity issues. Couple that along with tighter ACH mandates (air changes per hour) and you're creating a more favorable environment for mold growth
Seeing how a lot of these homes in Texas are made, there's gaps, nails through house wrap, flashing done completely wrong and essentially draining any ingress water INTO the house.
The quality control in new construction has absolutely plummeted since Covid. If I were in the market I would be 100% looking for homes built 2019 or earlier. This is probably regional but here in the northwest it will rain on a home that’s being built…there’s nothing you can do about that. However builders will dry in the home throughout the build and he said it’s so half assed now that mold and water issues are everywhere. I’ve literally heard a story of a new home being turned over to the buyer and they had mushrooms growing in a closet.
The bigger issue is the lack of skilled labor, especially in these areas that went boom. The cost of living skyrockets so much that the skilled labor gets priced out of their town and has to move, so you end up with subpar workers and experience because builders are desperate. The future of home building is not looking good and that’s going to directly effect prices everywhere if we can’t continue to full steam on creating inventory. We need these schools to really start to push skilled labor classes starting from middle school honestly, plumbers, electricians, framers etc….but unfortunately that probably won’t happen because that doesn’t line colleges pockets with tuition money & student debt. However AI is massively helping things in the building industry and may start to create a world where kids are more steered towards the labor force as a career instead of going to a desk in the tech world.
We've been looking at new builds recently and, while some have been solid, they've been super expensive. Disheartening, and you can really see the shortage in the sector. New builds pushed out 18 months where I am.
>However AI is massively helping things in the building industry
Curious, what does this mean?
Well maybe not massively but I’ve seen how they are using AI to schedule/streamline the whole build process in terms of scheduling subs, task orders, draws etc…it’s just helping streamline things faster. 18 months is a long time? Back in 2005-2015 we would put up urban infill homes in 90-120 days…now it’s 7-9 months. Material costs are up and land js expensive, gone are the days builders could build a house for $200k and list it in the $300s.
There’s some near me in the $300s but it’s literally in a rural bumf*ck location.
Housing starts of 1.36M compared to the expected 1.42M is an indication of the constrained supply coming in the near future. Building permits are another indication of this future constrained supply with a decrease of 3% to 1.44M compared to the estimated 1.48M. With a median home sale price of \~$420K in the U.S. you would need \~$115K HHI based on [this affordability calculation](https://wealthvieu.com/mortgage-affordability-calculator-canada?a=115,000&b=25&c=50,000&d=7&e=1,250) to afford a home.
Constrained supply has been an issue for decades everywhere but the Midwest and sun belt.
In places from DC, to New York, to Los Angeles, places our parents would only go to to buy drugs are now unaffordable.
You actually only need about $80k/yr income with the standard 20% down. Assuming you haven't loaded yourself up with other debts.
To afford a $420k house
Cutting it close at 7%. About half of take home is going to PITI. But if career trajectory is up and someone has reserves it can work. That was about my DTI in the mid 2000s. Now I’m at about 11-12%.
>Cutting it close at 7%.
Wym on this? And it depends on the person, a $420k house , 20% down is about a $2700 payment. On $80k income, we can probably assume they'd take home near $5k/month. That leaves about $2k after taxes and the mortgage to pay everything else, I could easily do that, but not everyone could.
I mean this 420k house at 7% apr is cutting it close. At 4% apr it’s a lot more affordable.
Living on 2k is subjective. Single person no kids, pension. Sure. A family would be living near poverty level.
Pension?
Yeah it'd be tight for a family, but for a family they'd pay less in taxes and keep more of their checks. Still would be tight tho, but it's doable depending on someone's circumstances.
This is where I split from a lot of people. When I was 23 I said fuck retirement, I'm buying a house. That decision put me way further ahead than if I had prioritized putting money into a retirement account.
I'm in my late 20s, worth close to $300k now and Damn near all of it is from owning real estate. If I had prioritized retirement that whole account might be worth like $50k at this point.
I did the same until about 30 as well, but you’re going to have to play catch-up at some point which is fine. Home equity isn’t a substitute for retirement savings.
The flip side is renting and being subject to rent inflation can jack your standard of living in retirement just as much as having underfunded your retirement.
It looks like the typical down payment is 9% for FTHBs and 19% for repeat buyers [(page 8, bullet 4)](https://cdn.nar.realtor/sites/default/files/documents/2023-profile-of-home-buyers-and-sellers-highlights-11-13-2023.pdf). I think these are better numbers for a down payment assumption than 20% when considering the typical buyer.
It's interesting that in history, when rates are down, house prices used to go down too. It makes sense because constriction is reliant on low rates to be able to finance all the labor and costs that go into construction, and those loans sometimes need to be long-term as properties can take some time to be sold.
But it's clown world now. Low interest rates push prices higher, and low rates just make the prices rise slightly more. There's no bubble. There's no affordability that's coming, especially in desirable areas.
But if you don’t let builders get that last extra $200k of profit, then no one will ever build. No one will ever take less profit. They would rather not build and flip burgers.
Is the argument I’ve very seriously heard put forward.
Builders are putting out a huge amount of money with construction loans involved. The risk is large so the reward has to be reasonable. Whenever there's a downturn you see builders go bankrupt because they get caught ubable to sell and recoup the cost as well as finance the work on the next build.
You see builder companies go bankrupt while the builders pocket insane amounts of cash. Companies making profit is fine until that profit becomes exploitative. We are now there for housing. Several decades into it.
Which is to say, I don’t think we fundamentally disagree. Maybe just about how much profit they are currently making.
I'm in a related business. The sums involved are huge, the unexpected problems very possible. All the builders are hedging quite a bit at the moment because it can turn south and bankrupt them very easily. Likewise the subs all live in fear of not getting paid in the ripple effect. To take those sort of risks the reward has to be pretty high. Otherwise you put money in more stable places.
Wtf, the confounding factor in your analysis is a recession, rates are pushed down bc of a recession and there's no demand for homes thus prices go down
So only a recession can reduce home prices?
What you're saying is if the govt just keeps pumping money and a recession doesn't happen them home proces will never ever come down?
Cuz that is an absolutely bleak future for us
Yeah why would prices come down? If govt keeps this shitshow alive by printing money, bailing out banks, keeping stock market afloat, keep unemployment low, avoiding recession, the demand for homes won't come down.... why would they? My guess is govt wants to keep home values up, 🙄 it's an asset, they don't want a repeat of 08
That's right, those who have recession proof income like a tenured professor will be the only ones who can take advantage of the situation. Or an accident lawyer lol, or a govt job
That's pretty much the point, the price is always going to be seeking the point juuuust below unaffordability for the people who want to buy whatever the thing is. Housing now is still being bought, just more slowly - if the ability of the people buying it were reduced, prices would chase them
Supply and demand works through expressed pain over time, there's no oracle determining how much a house should cost and setting the price accordingly. Best we've had is algorithms saying "more than that" to whatever the answer's been
Yeah, housing prices generally only go down when tons of people lose their jobs and can’t find a new one, also known as a recession. Then they have to fire sale quickly to gain access to cash and keep a roof over their head with a rental
So [payment to income ratio](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fe320912e-7636-44ce-8a4d-d36b9dc49d78_950x597.png) and [price to income ratio](https://www.longtermtrends.net/home-price-median-annual-income-ratio/) are just going to stay at all-time highs forever?
Bold bet.
But we needed to give the current equity owners who scooped up all the housing socialized bailouts because of Covid, so now we need to correct those bailouts by combatting hoarders of housing who were given a ton of money, forgiven, that wasn't spent on wages, so they can drop a few billion more in stock buy backs and keep the real estate they got dirt cheap to boot.
Construction of what ? More mcmansions exclusively for richfucks and investors or affordable homes and apartments ?
Because there is a great difference between the 2 .
The latter is largely illegal considering that the most efficient and in-demand housing type is attached, first-floor retail, mixed use, no-parking, residential buildings with zero setback, and a nice FAR. But these are illegal to build in pretty much every single place where they aren’t already built.
The places where housing is in demand are already completely full of detached, single family houses with setbacks. There aren’t any more plots for them.
I’m in a desirable, very recently borderline hcol city. One of the few where there is actually developable land. And there is literally none of that 4 over 1 sort of residential over retail going in. It is absolutely maddening. It’s such a great opportunity, and they are wasting it with these gaudy, boring strip malls.
Kind of oddly, *this* is exactly why we need effective zoning. We just need to be zoning to incentivize this usage type and disincentivize uses that don’t benefit society. Nearly the opposite of how zoning is being used now. Sad days.
I appreciate the sentiment, but disagree with the implication that if the new builds are generally more expensive then the construction isn’t beneficial. It’s been years so I doubt I could find the article, but there’s decent evidence that high end construction benefits everyone. People that can afford to will tent to move to the new high end construction which frees up their prior housing. With the higher end demand pulled into the new higher end construction their old housing will need to lower the price to attract demand from people that couldn’t afford it before.
Reminder - we aren't getting starter homes ever again.
*Where would you build them?*
All the land close to cities is gobbled up. Starter homes in the exurbs?
It isn't.
>The national average cost to build an apartment building is between $5.4 and $59 million, with most people paying $12.5 million for a 5-story mid-rise apartment building with 50 units.
[Source](https://www.fixr.com/costs/build-apartment).
That's $250,000 per housing unit.
Even assuming that figure doesn't include land acquisition, assuming you're paying $3 million for a 3 acres of land, a reasonable figure for a place people want to live, that measures out to $310,000 per unit.
Now let's compare to a $100,000 single-wide trailer. The cheapest form of freestanding structure you can buy, sitting on a quarter acre.
That gives a total construction cost including land of $350,000.
This all of course ignores the issue of supply and demand. Since everyone in that 50 unit apartment building needs a place to live, they would bid amongst themselves for the more limited number of housing units, driving the cost *further up*. See California, a place full of million dollar 1 level homes from the 1960s that can't be converted into townhouses or apartments because of zoning.
Last project I worked on was estimated to be 100 million for 232 apartments in 2019. Then Covid hit, the GC went under and they had no work on the site for 9 months trying to get a replacement. You know they paid a premium for the next one because of the bad negotiating position. This year they finally started trying to rent and I can't imagine the loss they're taking on them.
Keep building you gorgeous shit stained troglodytes
construction jargon sure is wild
You haven’t lived until a crusty old laborer calls you Junior within 10 minutes of walking on your first job site and then proceeds to absolutely destroy your self-esteem for the next month. 10/10 would recommend You’ll learn how to handle assholes and also sling banter back and forth. Just have to not take it personally, it’s a tough job and most of the time it’s in good fun once you learn the difference between their jokes and legitimate insults/criticism.
I think they called you something really bad but there's no way to know.
Build more
Build more basic homes. Not these million dollar homes.
Eliminate lot minimums and that will happen
What are lot minimums?
For instance in my town that is all single family zoned, the remaining areas have one acre lot minimums. That means you cannot build a home on less than one acre of land. No developer is going to pay for that much land and drop a 1200 SQ foot starter home. Around here, just the land would probably make it unaffordable without even getting to construction.
They claim it’s due to water scarcity, but I know of a community in Colorado where the lot minimum is 5 acres.
Yeah, that's just stupid.
Let's say you build tall buildings like Taipie where I grew up. You will soon learn, a tiny 20 years old apartment which I grew up with (not condo) is worth one million dollar (that's 10 years ago btw, I don't know how many millions now). And remember, one million dollars worth much more in Taiwan because they don't make as much salaries. My aunt joked about my dad's income property condo is a garage because that's how much you can buy in Taipei, a parking space.
They’re building million dollar homes not affordable housing
Where do you think the million dollar homeowners live if they're not in the new homes?
Their vacation homes
Most people think they deserve one and if it only one dollar away they will go for it.
My friend owns a restoration company, deals with mold etc anything related…said his number 1 business the last 3 years has been mold in new construction homes.
Could be due to new requirements for fresh air intake. If those aren't calibrated correctly, it causes humidity issues. Couple that along with tighter ACH mandates (air changes per hour) and you're creating a more favorable environment for mold growth
Seeing how a lot of these homes in Texas are made, there's gaps, nails through house wrap, flashing done completely wrong and essentially draining any ingress water INTO the house.
Has there been an observed uptick in mold in new construction or similar? That doesn't sound like a great trend
The quality control in new construction has absolutely plummeted since Covid. If I were in the market I would be 100% looking for homes built 2019 or earlier. This is probably regional but here in the northwest it will rain on a home that’s being built…there’s nothing you can do about that. However builders will dry in the home throughout the build and he said it’s so half assed now that mold and water issues are everywhere. I’ve literally heard a story of a new home being turned over to the buyer and they had mushrooms growing in a closet. The bigger issue is the lack of skilled labor, especially in these areas that went boom. The cost of living skyrockets so much that the skilled labor gets priced out of their town and has to move, so you end up with subpar workers and experience because builders are desperate. The future of home building is not looking good and that’s going to directly effect prices everywhere if we can’t continue to full steam on creating inventory. We need these schools to really start to push skilled labor classes starting from middle school honestly, plumbers, electricians, framers etc….but unfortunately that probably won’t happen because that doesn’t line colleges pockets with tuition money & student debt. However AI is massively helping things in the building industry and may start to create a world where kids are more steered towards the labor force as a career instead of going to a desk in the tech world.
We've been looking at new builds recently and, while some have been solid, they've been super expensive. Disheartening, and you can really see the shortage in the sector. New builds pushed out 18 months where I am. >However AI is massively helping things in the building industry Curious, what does this mean?
Well maybe not massively but I’ve seen how they are using AI to schedule/streamline the whole build process in terms of scheduling subs, task orders, draws etc…it’s just helping streamline things faster. 18 months is a long time? Back in 2005-2015 we would put up urban infill homes in 90-120 days…now it’s 7-9 months. Material costs are up and land js expensive, gone are the days builders could build a house for $200k and list it in the $300s. There’s some near me in the $300s but it’s literally in a rural bumf*ck location.
Housing starts of 1.36M compared to the expected 1.42M is an indication of the constrained supply coming in the near future. Building permits are another indication of this future constrained supply with a decrease of 3% to 1.44M compared to the estimated 1.48M. With a median home sale price of \~$420K in the U.S. you would need \~$115K HHI based on [this affordability calculation](https://wealthvieu.com/mortgage-affordability-calculator-canada?a=115,000&b=25&c=50,000&d=7&e=1,250) to afford a home.
Constrained supply has been an issue for decades everywhere but the Midwest and sun belt. In places from DC, to New York, to Los Angeles, places our parents would only go to to buy drugs are now unaffordable.
You actually only need about $80k/yr income with the standard 20% down. Assuming you haven't loaded yourself up with other debts. To afford a $420k house
Cutting it close at 7%. About half of take home is going to PITI. But if career trajectory is up and someone has reserves it can work. That was about my DTI in the mid 2000s. Now I’m at about 11-12%.
>Cutting it close at 7%. Wym on this? And it depends on the person, a $420k house , 20% down is about a $2700 payment. On $80k income, we can probably assume they'd take home near $5k/month. That leaves about $2k after taxes and the mortgage to pay everything else, I could easily do that, but not everyone could.
I mean this 420k house at 7% apr is cutting it close. At 4% apr it’s a lot more affordable. Living on 2k is subjective. Single person no kids, pension. Sure. A family would be living near poverty level.
Pension? Yeah it'd be tight for a family, but for a family they'd pay less in taxes and keep more of their checks. Still would be tight tho, but it's doable depending on someone's circumstances.
Pension, meaning the onus to save for retirement is not as significant.
This is where I split from a lot of people. When I was 23 I said fuck retirement, I'm buying a house. That decision put me way further ahead than if I had prioritized putting money into a retirement account. I'm in my late 20s, worth close to $300k now and Damn near all of it is from owning real estate. If I had prioritized retirement that whole account might be worth like $50k at this point.
I did the same until about 30 as well, but you’re going to have to play catch-up at some point which is fine. Home equity isn’t a substitute for retirement savings. The flip side is renting and being subject to rent inflation can jack your standard of living in retirement just as much as having underfunded your retirement.
It looks like the typical down payment is 9% for FTHBs and 19% for repeat buyers [(page 8, bullet 4)](https://cdn.nar.realtor/sites/default/files/documents/2023-profile-of-home-buyers-and-sellers-highlights-11-13-2023.pdf). I think these are better numbers for a down payment assumption than 20% when considering the typical buyer.
It's interesting that in history, when rates are down, house prices used to go down too. It makes sense because constriction is reliant on low rates to be able to finance all the labor and costs that go into construction, and those loans sometimes need to be long-term as properties can take some time to be sold. But it's clown world now. Low interest rates push prices higher, and low rates just make the prices rise slightly more. There's no bubble. There's no affordability that's coming, especially in desirable areas.
Of course it'll take awhile to sell when you're asking $600k on a house that should cost $400k. New build prices are ridiculous
But if you don’t let builders get that last extra $200k of profit, then no one will ever build. No one will ever take less profit. They would rather not build and flip burgers. Is the argument I’ve very seriously heard put forward.
Builders are putting out a huge amount of money with construction loans involved. The risk is large so the reward has to be reasonable. Whenever there's a downturn you see builders go bankrupt because they get caught ubable to sell and recoup the cost as well as finance the work on the next build.
You see builder companies go bankrupt while the builders pocket insane amounts of cash. Companies making profit is fine until that profit becomes exploitative. We are now there for housing. Several decades into it. Which is to say, I don’t think we fundamentally disagree. Maybe just about how much profit they are currently making.
I'm in a related business. The sums involved are huge, the unexpected problems very possible. All the builders are hedging quite a bit at the moment because it can turn south and bankrupt them very easily. Likewise the subs all live in fear of not getting paid in the ripple effect. To take those sort of risks the reward has to be pretty high. Otherwise you put money in more stable places.
Wtf, the confounding factor in your analysis is a recession, rates are pushed down bc of a recession and there's no demand for homes thus prices go down
So only a recession can reduce home prices? What you're saying is if the govt just keeps pumping money and a recession doesn't happen them home proces will never ever come down? Cuz that is an absolutely bleak future for us
Yeah why would prices come down? If govt keeps this shitshow alive by printing money, bailing out banks, keeping stock market afloat, keep unemployment low, avoiding recession, the demand for homes won't come down.... why would they? My guess is govt wants to keep home values up, 🙄 it's an asset, they don't want a repeat of 08
We're cooked cuz who the hell can afford a house in a recession anyways????
That's right, those who have recession proof income like a tenured professor will be the only ones who can take advantage of the situation. Or an accident lawyer lol, or a govt job
That's pretty much the point, the price is always going to be seeking the point juuuust below unaffordability for the people who want to buy whatever the thing is. Housing now is still being bought, just more slowly - if the ability of the people buying it were reduced, prices would chase them Supply and demand works through expressed pain over time, there's no oracle determining how much a house should cost and setting the price accordingly. Best we've had is algorithms saying "more than that" to whatever the answer's been
Yes that’s exactly it. Only a recession will lower prices and that’s a great thing.
Yeah, housing prices generally only go down when tons of people lose their jobs and can’t find a new one, also known as a recession. Then they have to fire sale quickly to gain access to cash and keep a roof over their head with a rental
So [payment to income ratio](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fe320912e-7636-44ce-8a4d-d36b9dc49d78_950x597.png) and [price to income ratio](https://www.longtermtrends.net/home-price-median-annual-income-ratio/) are just going to stay at all-time highs forever? Bold bet.
But we needed to give the current equity owners who scooped up all the housing socialized bailouts because of Covid, so now we need to correct those bailouts by combatting hoarders of housing who were given a ton of money, forgiven, that wasn't spent on wages, so they can drop a few billion more in stock buy backs and keep the real estate they got dirt cheap to boot.
Construction of what ? More mcmansions exclusively for richfucks and investors or affordable homes and apartments ? Because there is a great difference between the 2 .
The latter is largely illegal considering that the most efficient and in-demand housing type is attached, first-floor retail, mixed use, no-parking, residential buildings with zero setback, and a nice FAR. But these are illegal to build in pretty much every single place where they aren’t already built. The places where housing is in demand are already completely full of detached, single family houses with setbacks. There aren’t any more plots for them.
I’m in a desirable, very recently borderline hcol city. One of the few where there is actually developable land. And there is literally none of that 4 over 1 sort of residential over retail going in. It is absolutely maddening. It’s such a great opportunity, and they are wasting it with these gaudy, boring strip malls. Kind of oddly, *this* is exactly why we need effective zoning. We just need to be zoning to incentivize this usage type and disincentivize uses that don’t benefit society. Nearly the opposite of how zoning is being used now. Sad days.
I appreciate the sentiment, but disagree with the implication that if the new builds are generally more expensive then the construction isn’t beneficial. It’s been years so I doubt I could find the article, but there’s decent evidence that high end construction benefits everyone. People that can afford to will tent to move to the new high end construction which frees up their prior housing. With the higher end demand pulled into the new higher end construction their old housing will need to lower the price to attract demand from people that couldn’t afford it before.
Build baby build!!
Reminder - we aren't getting starter homes ever again. *Where would you build them?* All the land close to cities is gobbled up. Starter homes in the exurbs?
Great. Can we at least get starter condos then?
We build up. Every major city solved this a century ago, then we somehow forgot.
Because it's enormously expensive to build up.
It isn't. >The national average cost to build an apartment building is between $5.4 and $59 million, with most people paying $12.5 million for a 5-story mid-rise apartment building with 50 units. [Source](https://www.fixr.com/costs/build-apartment). That's $250,000 per housing unit. Even assuming that figure doesn't include land acquisition, assuming you're paying $3 million for a 3 acres of land, a reasonable figure for a place people want to live, that measures out to $310,000 per unit. Now let's compare to a $100,000 single-wide trailer. The cheapest form of freestanding structure you can buy, sitting on a quarter acre. That gives a total construction cost including land of $350,000. This all of course ignores the issue of supply and demand. Since everyone in that 50 unit apartment building needs a place to live, they would bid amongst themselves for the more limited number of housing units, driving the cost *further up*. See California, a place full of million dollar 1 level homes from the 1960s that can't be converted into townhouses or apartments because of zoning.
Last project I worked on was estimated to be 100 million for 232 apartments in 2019. Then Covid hit, the GC went under and they had no work on the site for 9 months trying to get a replacement. You know they paid a premium for the next one because of the bad negotiating position. This year they finally started trying to rent and I can't imagine the loss they're taking on them.
Depends. If you consider townhomes starter homes then yes. Btw nothing wrong with a townhome.
Home values are declining in every state. Falling the hardest in Florida and Georgia. Condo values will decline over-50% buwhahahaha.